andyinchville Posted January 26, 2011 Share Posted January 26, 2011 Hi All, I have been working on getting a rather large facility for last few weeks (initial contact before the X mas holidays). The facility has 2 buildings and has 1 full size National machine (Model 167 I think....but in case I am wrong about the model number it is a 5 wide, 6 shelf, dual auger machine)....and 1 full size soda machine in each building (total of 2 snack and 2 drink machines). The current vendor that services the property charges 90 cents for 2 OZ serving size chips, and $1.00 (+) for cake and candy. The current vendor charges 65 cents for can drinks and $1.25 for 20 OZ drinks. The current vendor (per the site manager) has been servicing the location for about 5 years now and services the sites twice per week. The current vendor is based 85 miles from the site. I initially solicited the business offering 50 cent chips (1 OZ size) and 75 cent candies and cakes (no commission). They were interested in setting up a meeting based on my initial contact and pricing but at the time I did not know the current vendor used 2 OZ chips. Today, I met with the manager and treasurer for the business...they indicated they didn't mind the fact that I offered no commission but were somewhat taken back by the fact that I was planning on only servicing the location once per week...(this is when I learned their current vendor was servicing them twice per week). I countered their concerns by stating that if they were truly that busy I would have no problem dropping off a second machine (or as many as needed) so we can maintain a once per week service interval (I did mention to them that I was about 45 miles away one way (I do have other stops in the area and along the way and even after their facility BUT the other stops only need servicing once per week) and that my step van only gets about 7 MPGs). Their break rooms are BIG yet one of the managers said there was not enough room for additional vending machines....He even went so far as to say the other company used have 2 drink machines at one of the buildings but one was later removed because "it took up too much space". One other concern they had was the fact that my pricing was based on single serving size of 1 OZ VS their chips mostly being 2 OZ in size.....( My 1 OZ chips cost me 19 cents each and I typically vend at 50 cents and my 2 OZ chip size bags would cost me 51 cents each...I suppose I could vend at 75 cents to seem to be alot cheaper and make it up on the drink sales (I don't typically do drinks but I can and would since the opportunity is here). The business wanted me to get back with them with updates on their concerns ( pricing on the larger chips and the service interval issue). How would you approach this situation ? What would be your plan of attack? As an aside....If I did try going to the 2 OZ serving size that would kind of mess me up a little because my truck is pretty much filled up and organized well for the 1 OZ chips...to add a bunch of 2 oz chips would definitely require some rethinking and reorganization...I know there are lots of potential reasons to go big but that could be another topic as well. My other concern is why the preference for multiple servicing per week rather than additional machines...I know they said space issues but believe me the break room is HUGE....I did mention that the other benefit to multiple machines is if 1 goes down there is still another to eat from (not the breakage should be an issue since I was going to buy refurnished machines for this site). The other thing that does sit in the back of my mind is if a vendor has been doing them for 5 years why the urge to switch for a quarter difference in price (at least that was the difference for cake / candy.....I still have to tell them my 2 OZ chip price)....I suppose 25 cents is a large percentage but the other company does have nice machines and a 5 year history....I almost hate to think if somebody undercut me by a nickle or dime or whatever that I would be given the boot....maybe there are other issues? Anyways, in advance for any and all input on this situation....I apologize for making it so long but I did want to try to include details and everything. Thanks! Andrew PS - Pepsi used to handle the drinks on this site so I guess I could contact them to see what the drink volume was. Link to comment Share on other sites More sharing options...
dogcow Posted January 26, 2011 Share Posted January 26, 2011 i dont know if dealing on all your prices is such a great idea ,as u noted there might be other service issues they have not mentioned. while it might make sense to undercut the vendor on some particular product or line (chips or candy) as a loss leader, coming out of the gate with lowball prices on everything is going to make it that much harder to raise them up when ur costs increase just my 2 cents. also maybe u can find a higher capacity machine..not sure if there is one but perhaps, or buy a big machine and run a few double selections of the best selling items Link to comment Share on other sites More sharing options...
Boazcat Posted January 26, 2011 Share Posted January 26, 2011 None of my accounts are that big, but I haven't encountered a location that was so concerned about prices, size and frequency of service... Maybe I've just been lucky. Link to comment Share on other sites More sharing options...
mission vending Posted January 27, 2011 Share Posted January 27, 2011 Hi All, I have been working on getting a rather large facility for last few weeks (initial contact before the X mas holidays). The facility has 2 buildings and has 1 full size National machine (Model 167 I think....but in case I am wrong about the model number it is a 5 wide, 6 shelf, dual auger machine)....and 1 full size soda machine in each building (total of 2 snack and 2 drink machines). The current vendor that services the property charges 90 cents for 2 OZ serving size chips, and $1.00 (+) for cake and candy. The current vendor charges 65 cents for can drinks and $1.25 for 20 OZ drinks. The current vendor (per the site manager) has been servicing the location for about 5 years now and services the sites twice per week. The current vendor is based 85 miles from the site. I initially solicited the business offering 50 cent chips (1 OZ size) and 75 cent candies and cakes (no commission). They were interested in setting up a meeting based on my initial contact and pricing but at the time I did not know the current vendor used 2 OZ chips. Today, I met with the manager and treasurer for the business...they indicated they didn't mind the fact that I offered no commission but were somewhat taken back by the fact that I was planning on only servicing the location once per week...(this is when I learned their current vendor was servicing them twice per week). I countered their concerns by stating that if they were truly that busy I would have no problem dropping off a second machine (or as many as needed) so we can maintain a once per week service interval (I did mention to them that I was about 45 miles away one way (I do have other stops in the area and along the way and even after their facility BUT the other stops only need servicing once per week) and that my step van only gets about 7 MPGs). Their break rooms are BIG yet one of the managers said there was not enough room for additional vending machines....He even went so far as to say the other company used have 2 drink machines at one of the buildings but one was later removed because "it took up too much space". One other concern they had was the fact that my pricing was based on single serving size of 1 OZ VS their chips mostly being 2 OZ in size.....( My 1 OZ chips cost me 19 cents each and I typically vend at 50 cents and my 2 OZ chip size bags would cost me 51 cents each...I suppose I could vend at 75 cents to seem to be alot cheaper and make it up on the drink sales (I don't typically do drinks but I can and would since the opportunity is here). The business wanted me to get back with them with updates on their concerns ( pricing on the larger chips and the service interval issue). How would you approach this situation ? What would be your plan of attack? As an aside....If I did try going to the 2 OZ serving size that would kind of mess me up a little because my truck is pretty much filled up and organized well for the 1 OZ chips...to add a bunch of 2 oz chips would definitely require some rethinking and reorganization...I know there are lots of potential reasons to go big but that could be another topic as well. My other concern is why the preference for multiple servicing per week rather than additional machines...I know they said space issues but believe me the break room is HUGE....I did mention that the other benefit to multiple machines is if 1 goes down there is still another to eat from (not the breakage should be an issue since I was going to buy refurnished machines for this site). The other thing that does sit in the back of my mind is if a vendor has been doing them for 5 years why the urge to switch for a quarter difference in price (at least that was the difference for cake / candy.....I still have to tell them my 2 OZ chip price)....I suppose 25 cents is a large percentage but the other company does have nice machines and a 5 year history....I almost hate to think if somebody undercut me by a nickle or dime or whatever that I would be given the boot....maybe there are other issues? Anyways, in advance for any and all input on this situation....I apologize for making it so long but I did want to try to include details and everything. Thanks! Andrew PS - Pepsi used to handle the drinks on this site so I guess I could contact them to see what the drink volume was. This is where tracking the performance of your business comes in handy. Do you know your COGS? Your avg revenue per stop? Your cost to service? By tracking this type of info you can run projections to see what you can do for the customer and still make a profit. As for what I would do. First I wouldn't change my whole business for one account (going to LSS size chips.) I would present it this way,"In order to help many of my customers requests for healthier items one of the solutions I use is to look at portion size, thus the reason for my offering 1 oz chip sizes. Besides if your employees are really that hungry they can buy two bags for 1.00 and get 2 oz of servings. The larger bags being sold to you for .90 are only 1.5 oz serving. So for a dime more they can get 25% more than what they are currently getting." It may or may not work, but its worth a try. Secondly, Keep the 1 oz chips at .50, establish a two tier pricing structure for candy items, 1.00 for the M&M Mars,Hershey and pastry products and .80 for the nutrigrain, rice crispy, trail mix etc. You have got to protect your margin if you are going to service more than 1X a week. Commodity prices are surging and IMO we will see significant price increases later this year like we experienced in 2008. Third, offer to service 2X a week for the first 30 days to get a feel for the account. After that you will service based on the usage of the machines. If they truly need to be serviced 2X a week then tell them they will get it. With the stated concerns of space and also the awareness of energy consumption I don't think putting in an extra machine is a viable solution. Might also want to consider a 3 day schedule. By that I mean week one service on Monday and Thursday, Week two Tuesday and Friday, Week three Wednesday only, then start over again. It should not be too much of a problem to shift some of your 1X a week accounts in the area so that you are doing several stops in the area each time you go to that side of town. Finally, put an agreement in writing so you don't get the boot over a nickel down the road especially if you are going to buy the equipment you need to go in. Make it long enough that you have at least a realistic chance of recovering the cost of your investment AFTER you cover your operating costs, including paying yourself for your time. If the current vendor has been in there for 5 years I doubt that you will get any sales info from Pepsi and that's working under the assumption that they would be willing to share it with you in the first place. The pricing you mention for drinks sounds reasonable. Did you check and see if you will need to provide a microwave(s) as well? Link to comment Share on other sites More sharing options...
dogcow Posted January 27, 2011 Share Posted January 27, 2011 mission, briefly can you explain how you calculate "cost to service" thanks! Link to comment Share on other sites More sharing options...
Boazcat Posted January 27, 2011 Share Posted January 27, 2011 This is where tracking the performance of your business comes in handy. Do you know your COGS? Your avg revenue per stop? Your cost to service? By tracking this type of info you can run projections to see what you can do for the customer and still make a profit. As for what I would do. First I wouldn't change my whole business for one account (going to LSS size chips.) I would present it this way,"In order to help many of my customers requests for healthier items one of the solutions I use is to look at portion size, thus the reason for my offering 1 oz chip sizes. Besides if your employees are really that hungry they can buy two bags for 1.00 and get 2 oz of servings. The larger bags being sold to you for .90 are only 1.5 oz serving. So for a dime more they can get 25% more than what they are currently getting." It may or may not work, but its worth a try. Secondly, Keep the 1 oz chips at .50, establish a two tier pricing structure for candy items, 1.00 for the M&M Mars,Hershey and pastry products and .80 for the nutrigrain, rice crispy, trail mix etc. You have got to protect your margin if you are going to service more than 1X a week. Commodity prices are surging and IMO we will see significant price increases later this year like we experienced in 2008. Third, offer to service 2X a week for the first 30 days to get a feel for the account. After that you will service based on the usage of the machines. If they truly need to be serviced 2X a week then tell them they will get it. With the stated concerns of space and also the awareness of energy consumption I don't think putting in an extra machine is a viable solution. Might also want to consider a 3 day schedule. By that I mean week one service on Monday and Thursday, Week two Tuesday and Friday, Week three Wednesday only, then start over again. It should not be too much of a problem to shift some of your 1X a week accounts in the area so that you are doing several stops in the area each time you go to that side of town. Finally, put an agreement in writing so you don't get the boot over a nickel down the road especially if you are going to buy the equipment you need to go in. Make it long enough that you have at least a realistic chance of recovering the cost of your investment AFTER you cover your operating costs, including paying yourself for your time. If the current vendor has been in there for 5 years I doubt that you will get any sales info from Pepsi and that's working under the assumption that they would be willing to share it with you in the first place. The pricing you mention for drinks sounds reasonable. Did you check and see if you will need to provide a microwave(s) as well? Wow! Great advice! Thanks! Link to comment Share on other sites More sharing options...
andyinchville Posted January 27, 2011 Author Share Posted January 27, 2011 HI Guys, Thanks for all the input thus far.... As an update, I called Pepsi to see what they thought of the account...(I work with Pepsi on several of my accounts and on all my new accounts (they provide machines and service the machines and I get a 15% commission...I realize I could make more with my own drink machines maybe but this arrangement seems to work well with little effort on my part (drink wise at least). Top my amazement, my contact remembered the account even after 5+ years! Pepsi had the account but was booted out when the current vendor installed their own machines....He (my Pepsi contact) said the site was OK but not real high volume (he will get me actual numbers when he gets the info later). Good idea about the trial period for the more than once a week service...I had not thought of a trial period (of course if they agree to that would imply that I would be "IN"....which could be good or bad depending on how the 2X per week servicing plays out...I Like the idea on how to stagger the service dates.. I had thought of a another possible alternative too....since my main "push" was adding a second snack machine to eliminate the 2X service per week .I thought I would research the power consumption of the unit (snack machine) for a month and offer a power rebate for the second machine to the company...that way they won't pay 1 cent for the energy used on the second snack machine....Maybe it was the power issue that turned them off to the second machine in the first place (I can see that as being a real potential issue BUT more with a soda machine than a snack machine).....I guess if I went real high tech I could offer to buy one of those "kill o watt" meters to plug the extra snack machine into to get the actual power consumed for rebate. I really like the "health conscious" aspect of offering the 1 OZ size VS the 2 OZ size.... I am not sure I can sell them on the 2 for a $1.00 VS 1 for 90 cents tho....I think I did see a lot of actual 2 OZ products VS 1.5 OZ products so theoretically I would be at a 10 cent disadvantage most of the time (As an aside, I do service some convenience stores and sell them on the idea of one one ounce serving size at 59 cents or 2 for a dollar being a better deal than a 99 cent LSS because a person can mix and match flavors for the same cost or eat one bag now while having a fresh (also bug free if working outside) second package for later))....Maybe since my cake and candy is still cheaper that would offset things enough.....? As an aside, I have never ordered the LSS (2 OZ) chips...I wonder if they would even fit in all my machines? It may be a hard sell for me to change candy prices to $1.00 being that I already told them cake and candy would be 75 cents (the pricing was not done to intentionally low ball....all my machines when I got the route were set that way except for 2 of them (hotels)....On the flip side...I was basing my prices on a once a week trip...so maybe I could say that little extra on 1 category of product is to offset the gas / wear and tear / time for the second weekly trip.... I don't know about the microwave part since it was never mentioned...I did notice tho that the table the microwave sat on was about 8 feet long and in the way of a perfect place for a second machine!....I thought about even offering to buy another smaller table for them if I can get the second machine in there. While most of my machines are places based on a handshake, I think you may be right about this one needing something in writing so as not to get kicked out too early...or at least before the machines are paid for. I would really like to get this site if reasonably possible since I just placed another machine right next door.....why can't they be reasonable and just do things "my way" ? HA Andrew PS - Please keep the good ideas coming....I'm going to try to pitch them something next week Link to comment Share on other sites More sharing options...
dogcow Posted January 27, 2011 Share Posted January 27, 2011 if they dont have a food machine why get them a microwave? do they have a coffee service? if not offer maybe u can use that to negotiate a higher price on the snack because the capital investment is lower on ur coffee maker anyway Link to comment Share on other sites More sharing options...
mission vending Posted January 28, 2011 Share Posted January 28, 2011 mission, briefly can you explain how you calculate "cost to service" thanks! So I don't hijack this thread, I started another thread with the cost to service explanation and an example of how I use this info. Link to comment Share on other sites More sharing options...
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